Abstract

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The Right to Vote on Taxes

In recent years, several states have adopted so-called "Right to Vote on Taxes" initiatives - i.e., constitutional amendments requiring voter approval for any new or increased taxes imposed by local governments. In this Article, Professor Stark traces the history of these political developments and investigates the normative question of what role voter approval requirements should play within a fiscal constitution designed to limit the taxing powers of local governments.

Advocates of a right to vote on taxes have premised their arguments on a libertarian concern for "taxpayer consent" - taxpayers themselves should have ultimate authority over their fiscal destiny. Yet even if one accepts taxpayer consent as a legitimate principle of fiscal governance, it is not clear that voter approval requirements advance that rationale, given the existing structure of the local tax base. Through an examination of the median voter's tax price for a variety of common local levies, Stark highlights those features of the local tax base that result in a divergence between those who vote on taxes and those who pay them. Where this divergence is substantial, the libertarian case for tax voting is the weakest. In order for the "taxpayer consent" rationale to have any traction, Stark argues that there must be a substantial correspondence between the population burdened by the tax and those who are empowered to vote does the libertarian. This analysis suggests a previously unexplored link between libertarian notions of taxpayer consent and an emerging literature in public finance economics concerning the optimal assignment of taxing authority to local governments. This literature has generally emphasized the efficiency gains from requiring local governments to rely primarily on taxes on their own residents, as opposed to source-based or other, more easily exportable taxes. Drawing on this literature, Stark argues for a new division of labor for the different types of tax limitation devices - if a state chooses to limit the taxing power of local governments, voter approval requirements should be used for residence-based taxes or the residential property tax, while alternative limitations may be more appropriate for those taxes with incidence effects that are less certain or more dispersed. Notably, California has adopted exactly the opposite approach, imposing direct limitations on the property tax and requiring voter approval for a variety of miscellaneous sales and business taxes.

The Article then addresses the central normative question underlying the right to vote on taxes: even if the local tax structure could be reformulated in the manner suggested, should states adopt voter approval requirements for new or increased taxes? While recognizing the natural reluctance of liberal-minded scholars to endorse libertarian objectives, Stark suggests that there may nonetheless be value in pursuing a right to vote on taxes. To investigate this possibility, he develops a preliminary defense of tax voting that takes the idea beyond the libertarian rationale offered by its advocates. Drawing from recent political theory concerning deliberative and participatory democracy, Stark argues that involving voters directly in local tax decisions may help stimulate public debate regarding the allocation of local tax burdens. Again, however, the structure of the local tax base will likely play an important role in determining the extent to which these potential benefits will actually accrue. Taxes that local residents pay directly, such as the residential property tax or residence-based income taxes, may be more likely to stimulate popular participation and deliberation than those taxes whose economic effects are less certain or more dispersed. The Article concludes by suggesting that greater attention should be paid to the interplay between constitutional design and tax structure.

Note: Reprinted by Special permission of Northwestern University School of Law, Law Review.